Half the people who buy their own health insurance, rather than depend on an employer, are in plans that have fewer benefits than what the U.S. health-care law will require beginning in 2014, a study found.
UnitedHealth Group Inc. (UNH), WellPoint Inc. (WLP) and other companies that participate in the insurance exchanges mandated by the law will have to improve benefits in some plans to meet requirements that they cover at least 60 percent of the cost of a person’s care, according to a study published today in Health Affairs. The research was paid for by the Commonwealth Fund, a New York-based nonprofit group that supports expanded insurance coverage.
About 51 percent of people with individual coverage have average deductibles of $3,881, the study showed, five times the amount for employer group plans. In addition, coverage sold to single people today may exclude pre-existing conditions, and most individual policies don’t include maternity care without costly riders, said Jon Gabel, the researcher who led the study.
“Deductibles will have to be lowered,” said Gabel, a researcher at NORC in Bethesda, Maryland, in a telephone interview. “The out-of-pocket limits may have to be lower. They will have to offer maternity benefits” as well as coverage for mental-health and substance-abuse treatment.
About 62 percent of people who now try to buy insurance for themselves in the so-called individual market report that they can’t find an affordable policy, said Sara Collins, vice president for affordable health insurance at Commonwealth. Those who do “often end up with coverage that’s really not adequate,” she said in a telephone interview.
Bronze, Silver, Gold
Health insurance to be sold in the government-run exchanges will be called bronze, silver, gold or platinum, depending on how much of the cost of care is covered. The law also caps annual out-of-pocket costs and eliminates limits on lifetime benefits. The exchanges are supposed to start in 2014.
The health law caps out-of-pocket costs for exchange plans. If the exchanges had been running in 2010, the limit would have been $5,950 for a single person or $11,900 for a family, according to the study.
Improving current plans to meet the health law’s requirements will probably raise consumer’s up-front premiums, Gabel said.
“Other things held constant, the cost of the plan will go up,” he said. The health law forbids insurers from cherry-picking only healthy customers, and adding sick people to insurance pools will also raise costs, he said.
People with policies today that don’t meet the health law’s requirements will have to “buy up” in 2014, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s lobby group in Washington, in an e-mail. “Any time new benefits are added to a policy that adds to the cost of coverage.”
Premium increases may be mitigated by other changes, Gabel said. The exchanges should reduce administrative costs for insurers and “make for more price competition” among plans, he said. The health law also limits, to 20 percent of premium revenue, the amount insurers can keep for administrative costs and profit, and creates subsidies to reduce the cost of insurance for low- and middle-income people.
“Presumably a lot of people on these really crummy plans in the study could potentially be eligible for premium subsidies,” Collins said. “It’s really going to be important that other provisions of the law address the premium growth issue.”
Researchers from the benefits consulting firm Towers Watson (TW) also participated in the study, which examined insurance plans in five states: California, Florida, Michigan, Pennsylvania and Utah. Those states account for about 31 percent of customers in U.S. individual insurance markets, according to the study. NORC is a research organization affiliated with the University of Chicago.
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